TMI Blog2016 (8) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... t created by statute. The rights and remedies are created by the statute. Arbitration is consensual. When the parties have voluntarily agreed to have their disputes resolved by Arbitration, it necessarily implies that they have consciously waived their right to have their disputes adjudicated by any other authority or by any other machinery - the amended provision of Section 19 of the Debt Recovery Act, namely Section 19(8) does not give an absolute power to a constituent to have the counter-claim adjudicated by the Tribunal as the subsequent sub-section, namely Section 19(11) of the RDB Act gives power to the Tribunal to pass an order for exclusion of the counter-claim. There is no provision in the Act for transfer of suits and proceedings, except section 31, which relates to suit/proceeding by a bank or financial institution for recovery of a debt. If the petitioner instead of filing an application under Section 9 of the Arbitration and Conciliation Act, 1996 could have filed a suit prior to initiation of recovery proceeding which would be otherwise maintainable there is no reason to conclude that the application for appointment of arbitration in terms of the arbitration cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1993 Act and the Bank having agreed to such procedure and mode of adjudication has consciously abandoned and/or waived its right to claim an adjudication otherwise then by way of an arbitration. The learned Senior Counsel has relied upon the decision of Co-ordinate Bench in HDFC Bank Ltd. Vs. Bhagwandas Auto Finance Limited Anr., a Division Bench judgment dated 21st January, 2011 (Bhagwandas Auto Finance Ltd. Ors. Vs. H.D.F.C. Bank Ltd.) affirming view expressed by the learned single Judge and a Full Bench Decision of the Delhi High Court in HDFC Bank Ltd. Vs. Satpal Singh Bakshi reported at 2013 (134) DRJ 566 (FB). It is submitted that the right of a constituent to file a suit notwithstanding the RDB Act, 1993 is not affected by the RDB Act and in this regard the learned Senior Counsel has relied upon a decision of the Hon ble Supreme Court in Nahar Industrial Enterprises Limited Vs. Hong Kong and Shanghai Banking Corporation reported at (2009) 8 SCC 646 and Indian Bank Vs. ABS Marine Products (P) Ltd. reported at (2006) 5 SCC 72. Mr. Mitra has referred to Paragraphs 105-111 of Nahar Industrial Enterprises Ltd. (supra) in support of the submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e its security interest only by invoking the provisions under the said two Acts and not by any other means, meaning thereby that no other remedy is available to the Bank except in taking recourse to the provisions of the said two Acts. Mr. Banerjee has laid much emphasis on Section 34 of the SARFAESI Act, 2002 in order to impress upon this Court that the phrase any action taken or to be taken in the said Section debars any authority including an arbitrator to adjudicate upon the disputes if the nature of the dispute falls within the jurisdiction of the Debt Recovery Tribunal. It is submitted that by reason of Sections 17, 18 and 34 of the RDB Act, 1993 read with Section 34 of the SARFAESI Act, 2002, there has been a complete ouster jurisdiction to decide the dispute raised by the respondent and such dispute can only be decided by the Debt Recovery Tribunal constituted under the RDB Act. The aforementioned Sections are as follows:- RDB Act, 1993 S.17. Jurisdiction, powers and authority of Tribunals.-(1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993). It is submitted that Section 18 of the RDB Act refers to no court or other authority which includes an arbitrator. The arbitrator is an authority within the meaning of Section 18 of the RDB Act and in this regard he has relied upon a decision of the Hon ble Supreme Court in Union of India Ors. Vs. Alok Kumar reported at (2010) 5 SCC 349. Mr. Banerjee has referred to the orders dated May 6, 2011 and December 14, 2015, passed in the Special Leave Petition against the order of the Division Bench in HDFC Bank Ltd. (supra) being SLP Nos.11097-11099/2011 (Bhagwandas Auto Finance Ltd. Anr. VS. HDFC Bank Ltd.) and submits that by reason of the observations made by the Hon ble Supreme Court while granting special leave that the matter involves a pure question of law and pendency of the proceeding would not come in the way of recovery of amounts in accordance with law, the efficacy and binding nature of the order passed by the Co-ordinate Bench as well as by the Hon ble Division Bench loses is diluted and the matter is required to be considered afresh without being influenced by the observations in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bel and, accordingly, a party cannot invoke Section 8 of the Arbitration and Conciliation Act, 1996 even if they had agreed upon arbitration as the forum for settlement of disputes between them. In reply, Mr. Abhrajit Mitra, the learned Senior Counsel has submitted that the pendency of the Special Leave Petition cannot completely wipe out the law laid down by the Single Judge Bench as well as the Division Bench inasmuch as the said order of the Hon ble Supreme Court is only binding between the parties and cannot affect the present proceeding. In this regard, the petitioner has relied upon the following decisions:- i) Jayantilal Hansraj Shah Ors. Vs. Hemkunverben Dolatrial Dave and Ors. reported at MANU/GJ/0202/1994; ii) Niranjan Chatterjee Ors. Vs. State of West Bengal Ors. reported at 2007 (3) CHN 683; iii) Pijush Kanti Chowdhury Vs. State of West Bengal Ors. reported at 2007(3) CHN 178; iv) Viswapriya (India) Limited Ors. Vs. Government of Tamil Nadu Ors. reported at MANU/TN/2482/2015; v) Him Privesh Environment Protection Society Vs. State of Himachal Pradesh Ors. reported at MANU/HP/0687/2012. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there was whether a constituent s claim could referred to Debts Recovery Tribunal so that both the claim and counter-claim herd by the DRT in order to avoid multiplicity of proceedings. The decision in Surya News Print (supra) of the Division Bench of the Orissa High Court is distinguished by submitting that issue before the Division Bench was whether there was an existence of an arbitration agreement. In answering the said issue, the Division Bench observed that RDB Act, 1993 and SARFAESI Act, 2002 would prevail over the Arbitration and Conciliation Act, 1996. The decision was not rendered on consideration of the issues raised and argued in this proceeding and, accordingly, the said observations would have no binding effect in this proceeding. On the basis of the aforesaid submissions it is required to be considered as to whether an arbitrator shall be appointed in terms of the arbitration agreement. Similar point came up for consideration before a Co-ordinate Bench in HDFC Bank Ltd. (supra). Although the said decision was rendered in connection with an application under Section 9 of the Arbitration and Conciliation Act, 1996 but it could be seen fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in protracted litigation, whether they were recovery proceedings filed in regular courts by them or genuine or frivolous actions instituted by the constituents. Banking business was then almost completely State-controlled and the worry was in public funds remaining entangled in time-consuming and ruinous court proceedings. There was a Tiwari Committee set up which recommended setting up independent tribunals for recovering debts of banks and financial institutions. The Narasimham Committee report thereafter culminated in first an ordinance and then the said Act of 1993. The bar under Section 18 of the 1993 Act is not on a claimant, but on a court or other authority. The issue is as to whether an arbitrator would fall within the expression other authority used in Section 18. In administrative law, an authority is a body having jurisdiction in certain matters of a public nature. For a person or body to be an authority there must be an ability conferred by law to alter or ascertain, subject to the command of the relevant law, the rights, duties, liabilities or other legal relations, either of the authority or of other persons. The authority which is referred to in Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but if the agreement is sought to be specifically enforced the judicial authority in seisin of the action would ordinarily enforce the agreement. There is no reason to suspect that if the petitioner bank carried a claim referable to arbitration to a Debts Recovery Tribunal, the respondents could not successfully enforce the arbitration agreement by way of an application under Section 8 of the Arbitration and Conciliation Act, 1996. If the provisions of a statute have to be construed not as theorems of Euclid but the words need to be read with some imagination of the purpose which lie behind them, the 1993 Act cannot be understood to imply that an arbitration agreement covering the subject matter of a claim that can be carried to a Debts Recovery Tribunal cannot be enforced by reason of the bar under Section 18 thereof. Such an interpretation would produce an undesirable result and would do violence to the intent and purpose of the statute. The 1993 Act has an aim, it seeks to obviate the malady of bank claims getting stuck in the perceived clogging in the Court system; it seeks to redress a supposed inadequacy (whether or not it has succeeded, is an entirely different matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before an arbitral tribunal is certainly not a suit or other proceeding pending before any Court. Apart from the common sense logic that an enactment for the benefit of a class of claimants may not be easily interpreted to bar such claimants from referring their claims to arbitration unless expressly excluded, Section 31(1) of the Act is significantly instructive in showing that the said Act does not rule out a claim capable of adjudication under the Act to be taken before an arbitral tribunal by the consensus of the relevant parties. The respondents first contention that the subject matter of the petitioner s claim is not arbitrable is rejected. The respondents have made some murmurs as to the jurisdiction of the Court to incidentally deal with a matter of the present kind despite the clear bar under Section 18 of the 1993 Act. In proceedings under Section 9 of the Arbitration and Conciliation Act, the Court acts as a surrogate where the real authority is with the arbitral tribunal. Under Section 9 of the 1996 Act, the Court does not finally adjudicate upon any matter capable of being assessed by the arbitral tribunal; it merely provides for an interim arrangement. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould exclusively fall within the domain of public for a (courts). (ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the excepted matters excluded from the purview of the arbitration agreement. (iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the arbitral tribunal, or whether they do not arise out of the statement of claim and the counter claim filed before the arbitral tribunal. A dispute, even if it is capable of being decided by arbitration and falling within the scope of arbitration agreement, will not be arbitrable if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such joint list of disputes, does not form part of the disputes raised in the pleadings before the arbitral tribunal. The observations on the following paragraphs, namely, paragraphs 12, 13 and 14 are of relevance which are reproduced hereunder:- 12. With the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suit is capable of adjudication only by a public forum or the relief claimed can only be granted by a special court or Tribunal. 34. The term 'arbitrability' has different meanings in different contexts.The three facets of arbitrability, relating to the jurisdiction of the arbitral tribunal, are as under: (i) whether the disputes are capable of adjudication and settlement byarbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the arbitral tribunal) or whether they would exclusively fall within the domain of public fora (courts). (ii) Whether the disputes are covered by the arbitration agreement?That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the 'excepted matters' excluded from the purview of the arbitration agreement. (iii) Whether the parties have referred the disputes to arbitration? Thatis, whether the disputes fall under the scope of the submission to the arbitral tribunal, or whether they do not arise out of the statement of claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. (Vide: Black's Law Dictionary). 38. Generally and traditionally all disputes relating to rights inpersonam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to sub-ordinate rights in personam arising from rights in rem have always been consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts but only through the tribunals which is given special jurisdiction not available with the civil courts. Likewise, Industrial Disputes Act, 1947 creates special rights in favour of the workman or employers and gives special powers to the industrial adjudicators/tribunals to even create rights which powers are not available to civil courts. Obviously such disputes cannot be decided by means of arbitral tribunals which are substitute of civil courts. On the other hand, in so far as tribunal ike Debt Recovery Tribunal is concerned, it is simply a replacement of civil court. There are no special rights created in favour of the banks or financial institutions. There are no special powers given to the Debt Recovery Tribunal except that the procedure for deciding the disputes is little different from that of CPC applicable to civil courts. Otherwise, the Debt Recovery Tribunal is supposed to apply the same law as applied by the civil courts in deciding the dispute coming before it and is enforcing contractual rights of the Banks. It is, therefore, only a shift of forum from civil court to the tribunal for speedy disposal. Therefore, applying the principle contained in Booz Allen an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and what the word code means. It has been explained in P. Ramanatha Aiyar s The Law Lexicon (2nd Edn. 1997) as under: A general collection or compilation of laws by public authority; a system of law; a systematic and complete body of law, on any subject such as Civil Procedure Code, Code of Criminal Procedure, Penal code. Etc. The code is broader in its scope, and more comprehensive in its purposes. Its general object is to embody, as near as practicable, all the law of the State, on any particular subject. It is more than evidentiary of the law; it is the law itself. 80. Complete further adds a degree of certainty to the code. It has to be a compilation of provisions which would comprehensively deal with various aspects of the purpose sought to be achieved by that law and its dependence on other legislations is either absent or at best is minimal. The provisions of the enactment in question should provide for a complete machinery to deal with various problems that may arise during its execution. Sufficient powers should be vested in the authority/forum created under the Act to ensure effectual and complete implementation of the Act. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The bank, however, had voluntarily agreed to have the dispute resolved through arbitration. Section 34 of both the RDB Act does not prevent a constituent to file a suit for any breach of the loan agreement. A constituent is not required to wait until the bank files a recovery proceeding against the constituent before the Debt Recovery Tribunal. Moreover, the amended provision of Section 19 of the Debt Recovery Act, namely Section 19(8) does not give an absolute power to a constituent to have the counter-claim adjudicated by the Tribunal as the subsequent sub-section, namely Section 19(11) of the RDB Act gives power to the Tribunal to pass an order for exclusion of the counter-claim. The bank also cannot contend that the agreement containing the arbitration clause is unenforceable being vitiated by fraud or against public policy. Moreover, the bank has participated in the proceeding and has received substantial benefits under the orders passed from time to time in the Section 9 proceeding. The bank has acted in derogation of its rights and thereby waived its right to raise any objection at this stage. A faint attempt was made at the fag end of the said proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the appellate authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the appellate authority would be restored and it can be said to be pending before the appellate authority after the quashing of the order of the appellate authority. The same cannot be said with regard to an order staying the operation of the order of the appellate authority because in spite of the said order, the order the appellate authority continues to exist in law and so long as it exists, it cannot be said that the appeal which has been disposed of by the said order has not been disposed of and is still pending. We are, therefore, of the opinion that the passing of the interim order dated February 21, 1991 by the Delhi High Court staying the operation of the order of the appellate authority dated January 7, 1991 does not have the effect of reviving the appeal which had been dismissed by the appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this expression in common parlance. In common parlance, the word `authority' is understood to be, power to exercise and perform certain duties or functions in accordance with law. Authority may vest in an individual or a person by itself or even as a delegatee. It is the right to exercise power or permission to exercise power. Such permission or right could be vested in an individual or a body. It can also be in conferment of power by one person to another. This expression has been used differently in different statutes and can be given a different meaning or connotation depending upon the context in which it is used. The purpose and object of using such expression should be understood from the provisions of the relevant law and the purpose sought to be achieved. 33. The word `authority' is derived from the Latin word auctoritas, meaning intention, advice, opinion, influence or command which originate from an auctor, indicating that authority originates from a master, leader or author, and essentially is imposed by superior upon inferior either by force of law (structural authority) or by force of argument (sapiential authority) 34. Farlex Free Dictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity of an agent to act for his principal. An authority is general when it extends to all acts, or all connected with a particular employment, and special when confirmed to a single act. AUTHORITY, is nothing but a power to do something; it is sometimes given by word, and sometimes by writing; also it is by writ, warrant, commission, letter of attorney c. and sometimes by law. The authority that is given must be to do a thing lawful: for if it be for the doing anything against law, as to beat a man, take away his goods, or disseise him of his lands this will not be a good authority to justify him that doth it. Authority (In contracts) the lawful delegation of power by one person to another. Authority (In administrative law) is a body having jurisdiction in certain matters of a public nature. Authority. Permission. Right to exercise powers; to implement and enforce laws; to exact obedience; to command; to judge. Control over; jurisdiction. Often synonymous with power. The power delegated by a principal to his agent. The lawful delegation of power by one person to another. Power of agent to affect legal relations of principal by acts done i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernmental functions, Rajasthan State Electricity Board v. Mohan Lal, AIR 1967 SC 1857 (1863): (1967) 3 SCR 377. (Constitution of India, Art. 12) In view of the aforesaid this Court fully adopts the interpretation given by the Co-ordinate Bench of other authority to exclude arbitration. In Kingfisher Airlines Ltd. (supra) the issue was whether an industrial dispute or a dispute relating to enforcement of a right or an obligation created under the Industrial Disputes Act is arbitrable, that is, capable of being adjudicated by a private forum of an arbitrator. Considering the scheme of the Industrial Disputes Act and having regard to the fact that the said Act itself contemplates conciliation and other modes of dispute between the parties and is a special statute dealing with the industrial dispute it was held that the industrial dispute is rendered inarbitrable outside the Industrial Disputes Act. The ratio of the decision can be culled out from the following paragraphs of the judgment:- 14). The preamble of the I.D. Act, shows that it is enacted to provide a machinery and forum for the investigation of industrial disputes and for the settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty service. He is required to try to promote a settlement between the parties. If he succeeds in his attempt, he sends a report to the appropriate government alongwith memorandum of settlement signed by the parties to the dispute. In case of failure in promoting settlement, he submits a failure report setting forth the steps taken by him for ascertaining the facts and circumstances relating to the dispute and for bringing about the settlement. The report is also required to state the reasons on account of which, in his opinion, a settlement could not be arrived at. On receipt of the failure report from the conciliation officer, the appropriate government, if satisfied, makes a reference either to a Board or to the Labour Court or to the Industrial Tribunal or National Tribunal. Section 12(6) provides that report under Section 12 shall be submitted within 14 days from the commencement of the conciliation proceedings which time can be extended by the agreement between the parties to the dispute. Similarly, Sections 14 and 15 require the Court of Enquiry, the Labour Courts and the Industrial Tribunals to complete the proceedings before them within the specified time. Sections 16 to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the parties to the arbitration agreement and the private fora of their choice. This shows that an industrial dispute is not treated solely as an individual dispute, but is always approached from the context of the larger picture of the industry as a whole. The status of the arbitrator appointed under Section 10A of the I.D. Act, is also different. To put it in the words of the learned Single Judge of this Court from Nagpur Bench in the unreported decision in Western Coalfield's case (supra), he falls within the rainbow of statutory tribunals . The relevant observations from the decision read as follows : The Act seeks to achieve social justice on the basis of collective bargaining. Collective bargaining is a technique by which dispute as to conditions of employment is resolved amicably by agreement rather than coercion. The dispute is settled peacefully and voluntarily although reluctantly between labour and management. The voluntary arbitration is a part of infrastructure of dispensation of justice in the industrial adjudication. The arbitrator thus falls within the rainbow of statutory tribunals. Further, Section 10A(5) of the I.D. Act, specifically ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the civil courts. It is only for the claims of the banks and the financial institutions above the aforementioned sum that they have to approach the Debt Recovery Tribunal. It is also without any cavil that the banks and the financial institutions, keeping in view the provisions of Sections 17 and 18 of the Act, are necessarily required to file their claim petitions before the Tribunal. The converse is not true. Debtors can file their claims of set off or counter-claims only when a claim application is filed and not otherwise. Even in a given situation the banks and/or the financial institutions can ask the Tribunal to pass an appropriate order for getting the claims of set-off or the counter claims, determined by a civil court. The Tribunal is not a high powered tribunal. It is a one man Tribunal. Unlike some Special Acts, as for example Andhra Pradesh Land Grabbing (Prohibition) Act, 1982 it does not contain a deeming provision that the Tribunal would be deemed to be a civil court. 118. The liabilities and rights of the parties have not been created under the Act. Only a new forum has been created. The banks and the financial institutions cannot approach the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrower or any other person against a bank for any other relief. There is no provision in the Act for transfer of suits and proceedings, except section 31, which relates to suit/proceeding by a bank or financial institution for recovery of a debt. Sections 19(6) to (11) (as introduced by Act 1 of 2000), are merely enabling provisions. Significantly, Sections 17 and 18 have not been amended. Jurisdiction has not been conferred on the Tribunal, even after amendment, to try independent suits or proceedings initiated by borrowers or others against banks/financial institutions, nor the jurisdiction of civil courts barred in regard to such suits or proceedings. The only change that had been made was to enable the defendants to claim set-off or make a counterclaim as provided in Sections 19(6) to 19(8) in applications already filed by the banks or financial institutions for recovery of the amounts due to them. Making a counterclaim in the bank s application before the Tribunal is not the only remedy, but an option available to the defendant borrower. He can also file a separate suit or proceeding before a civil court or other appropriate forum in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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